Northrop Grumman (NOC) Approves 9% Increase In Dividend

Northrop Grumman Corporation (NYSE:NOC) announced that its board of directors has approved a 9% hike in its quarterly common stock dividend. This has taken the annualized payout to $4.80 per share.

The new quarterly dividend of $1.20 per share is up by a dime from the earlier quarterly dividend. The hiked dividend will be paid on Jun 20, 2018 to shareholders of record at the close of business on Jun 4.

The board of directors of Northrop Grumman Corporation has been clearing annual dividend hikes for more than a decade now. We note that yearly payout increases are becoming a regular event for this defense major. The current dividend revision marked the 16th consecutive annual dividend raise by the company.

The current annualized dividend yield is 1.50% compared with the industry average of 0.91%. This rise in distributable income vouches for the company’s strong balance sheet and a steady cash flow position, which provides it with financial flexibility and a cushion for incremental dividend.

Can Northrop Sustain Dividend Hikes?

Northrop has inked a deal to take over rocket-maker Orbital ATK (NYSE:OA) for $9.2 billion in 2017 and the transaction is expected to close in the first half of 2018. This acquisition will likely boost Northrop’s product portfolio as Orbital ATK has contracts with NASA and the U.S. Army. The consolidation will be accretive to Northrop’s earnings per share and its free cash flow in 2018. Further, the acquisition might lead to annual cost savings of nearly $150 million by 2020.

Defense being a capital-intensive sector, business investment remains Northrop’s first priority. The company continues to anticipate free cash flow of $2-$2.3 billion after capital spending of approximately $1 billion in 2018.

The company is committed to deliver higher returns to its shareholders by way of greater dividend payouts and efficient share repurchase strategy. We believe that the company’s strong cash flow and organic growth will help generate sufficient funds to meet its financial commitments.

Dividend Hikes in the Same Space

Northrop Grumman is not the only company to reward its shareholders with increased dividend. There are also other players in the same industry to add shareholder value.

For instance, General Dynamic Corporation (NYSE:GD) announced a quarterly dividend of 93 cents per share on Mar 7, 2018, registering a raise of 10.7% compared with the dividend amount paid in the previous quarter.

The Boeing Company (NYSE:BA) also approved a quarterly dividend of $1.71 per share on Dec11, 2017, delivering a 20% hike compared with the dividend paid in the previous quarter.

Price Movement

Northrop Grumman Corporation’s stock has rallied about 31.2% in the past year, underperforming Zacks Aerospace/Defense industry’s gain of 42.5%.

Zacks Rank

Northrop Grumman Corporation currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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